SETP No. 14 The Economic Value of Incremental Employment in the ...

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labour-based part of Table 7.9 is replicated from Table 7.3 for ease of comparison. 7.27 We draw some interesting conclusions from Table 7.9. After adjusting for the imported component of locally produced wheel loaders we find that labour-based construction can compete financially with equipment-based construction in soft ground conditions with daily wages at or lower than R33 even where only 48% of the wheeled loader is manufactured from imported components. Labour can compete with a 71% imported wheel loader in soft and normal soil conditions, although daily wages cannot be much more than R33. As before, increased labour productivity (due to learning and capacity building) and increase equipment cost (due to transport to remote areas) will both lower the relative cost of labour. 7.28 The overall macro economic impact. 7.29 In this final subsection the overall macro economic effects of equipment-based construction is estimated and compared to the macro economic from labourbased construction. 7.30 The methodology used is the same as that employed in chapters 5 and 6 where we allocate expenditure items to SIC codes and use the input output multipliers to estimate the overall macro economic effect. Table 7.10 is extracted from Table 7.8 and indicates the applicable SIC codes for each expenditure item. For the salary of the wheeled loader driver and for the margins accruing to the owner of the wheeled loader we employ the methodology used in chapter 5 – at the relevant income level the change in expenditure patterns are measured and the macro economic effect estimated. 7.31 In addition to this an assumption is made that the capital cost of the wheeled loader is written off over five years. Hence if there is any imported capital component this reduces the macro economic effects for the first five years only. Table 7-10 Annual Macro Economic Impact of operating a locally manufactured Wheeled Loader Assumptions table Based on a Bell 1204 with 48% import component. Local component Income First five years After five years SIC code category Capital cost Five year amortisation 64,531 - 3,824 Driver Works 7 hr day 22 day month 36,960 36,960 Final demand R40,000 Diesel & oil Full cost (multiplier measures impact) 73,920 73,920 3,530 Service 100% local 11,088 11,088 3,830 Spares Full cost (multiplier measures impact) 9,240 9,240 3,824 Total margin Revenue less direct costs 23,980 145,992 Final demand R120,000 Total 219,719 277,200 7.32 Table 7.11 records the estimated macro economic impact of the operation of a wheeled loader with a 48% capital imported component and an annual operating cost of R277,200. 57
• In the first five years of operation the wheeled loader will make an annual contribution to GDP of R292,000, sustain 4.7 indirect jobs and result in annual imports to the value of R74,000. • After five years when the capital cost is amortised the operation of the wheeled loader will contribute over R373,000 to GDP, sustain 9.6 full time indirect jobs and result in increased annual imports worth R87,000. Table 7-11 Annual Macro Economic Impact of operating a locally manufactured Wheeled Loader Output table Based on a Bell 1204 with 48% import component and capital cost R619,000 First five years After five years Contribution to GDP Jobs Imports Contribution to GDP Jobs Imports Capital cost 98,060 0.9 19,909 Driver 54,360 1.8 10,047 54,360 1.8 10,047 Diesel & oil 74,601 0.6 31,691 74,601 0.6 31,691 Service 15,950 0.2 3,053 15,950 0.2 3,053 Spares 14,041 0.1 2,851 14,041 0.1 2,851 Total margin 35,269 1.1 6,518 214,721 6.9 39,684 Total 292,280 4.7 74,068 373,672 9.6 87,325 7.33 We are finally in a position to compare the macro economic effects of equipmentbased construction in the form of a 48% imported Bell 1204 costing an annual R277,000 to operate to labour-based construction where the labour costs are R277,000 a year. Table 7.11 records the macro economic effect of a wheeled loader. Table 7.12 records the macro economic effect of labour-based construction. 7.34 At the lower income levels (where the national public works programme targets) a labour cost of R277,000 a year (where this increases household income by R5000 a year) will make a contribution to GDP of nearly R387,000, sustain 14 indirect jobs and generate imports of nearly R71,000. In contrast the annual operation of a wheeled loader will add R292,000 to GDP while imported capital is amortised and R373,000 after capital is amortised. Similarly 4.7 and 9.6 jobs will be sustained and imports will increase by R74,000 and R87,000. Table 7-12 National macro economic impact following a R5000 increase in expenditure per household for a total budget of R277,000 All households Increases in annual household income from between: R1 & R5000 R5,000 & R10,000 R10,000 & R20,000 R20,000 & R30,000 R30,000 & R40,000 to between: R5,000 & R10,000 R10,000 & R20,000 R20,000 & R30,000 R30,000 & R40,000 R40,000 & R50,000 Contribution to GDP 386,919 393,758 405,402 408,019 414,459 Indirect jobs created 14 14 14 13 13 Increased in imports 70,899 74,043 74,902 75,950 75,837 58
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SETP No. 14 The Economic Value of I
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Copyright © International Labour O
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Table of Contents PREFACE .........
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List of Abbreviations CBPWP GDP ILO
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Structure of the Report This report
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8. It is shown in the forth area of
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1.8 In order to achieve this object
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3 A Labour Focussed Profile of the
Page 21 and 22: Figure 3-2 Employment in the Constr
Page 23 and 24: construction. Real wages are higher
Page 25 and 26: Table 3-3 Construction industry Ave
Page 27 and 28: Figure 3-7 1997 October Household S
Page 29 and 30: 3.23 There are four possible reason
Page 31 and 32: Figure 3-8 Number of persons by inc
Page 33 and 34: 3.35 Estimates of average provincia
Page 35 and 36: 3.41 Table 3.11 reports on the prov
Page 37 and 38: 3.45 An attempt was made to verify
Page 39 and 40: Summary 3.50 The construction indus
Page 41 and 42: A profile of income and expenditure
Page 43 and 44: Figure 4-1 Percentage of expenditur
Page 45 and 46: Table 4-3 Expenditure increases for
Page 47 and 48: Table 4-5 Expenditure increases for
Page 49 and 50: 4.18 Here we find that grain mill p
Page 51 and 52: • Labour and capital are in unlim
Page 53 and 54: Figure 5-1 Schematics of the Mechan
Page 55 and 56: slightly higher additional income a
Page 57 and 58: Table 5-9 Indirect job creation Num
Page 59 and 60: 6 The Macro Economic Impact of the
Page 61 and 62: Standard Industrial Classification
Page 63 and 64: Table 6-6 Macro economic impact of
Page 65 and 66: Figure 7-2 Cost of Gravel Road Cons
Page 67 and 68: • When adverse soil or other cond
Page 69 and 70: Table 7-5 Capital cost amortisation
Page 71: Table 7-8 Local and Import costs of
Page 75 and 76: 7.41 Table 7.4 is sourced from Tabl
Page 77 and 78: 8.10 Second, the analysis did not t
Page 79 and 80: References Bulmer-Thomas, V. (1982)
Page 81 and 82: practical feasibility alone, labour
Page 83 and 84: domestic industry to set against th
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